Part 1: When is it revenue? For each of the following scenarios, state which day you would recognize revenue using cash basis accounting and accrual basis accounting.
1. Roubles Co. provided a service on January 24 and billed the customer. Roubles Co. receives payment on February 2 and deposits the check on February 3.
a. Cash basis: Record revenue on _________________
b. Accrual basis: Record revenue on _________________

2. Simpkins Co. received payment from a customer on January 28 for services to be performed in February. Simpkins completes the job on February 18.
a. Cash basis: Record revenue on _________________
b. Accrual basis: Record revenue on _________________

3. Rodriguez Co. provides a service on January 15 and receives payment the same day. The check is not deposited at the bank until January 18.
a. Cash basis: Record revenue on _________________
b. Accrual basis: Record revenue on _________________

Part 2: When is it an expense? For each of the following scenarios, state which day you would record an expense using cash basis accounting and accrual basis accounting.
4. Landers Co. receives a bill for advertising in January on January 31. They pay the bill on February 10.
a. Cash basis: Record expense on _________________
b. Accrual basis: Record expense on _________________

5. Boulos Co. pays for a one year subscription to a professional journal on January 1. The first issue is received February 8.
a. Cash basis: Record expense on _________________
b. Accrual basis: Record expense on _________________

6. Nixon Co. employess work 180 hours from Jan 28-31, but payday is on February 2.
a. Cash basis: Record expense on _________________
b. Accrual basis: Record expense on _________________

Part 3:
Spartan Company entered into the following transactions during the month of January, their first month of business. Complete the accounting equation for each transaction assuming they use ACCRUAL basis accounting. Then prepare the income statement for the month ended January 31.
Record the following transactions in the general journal, post to the ledger, and prepare a trial balance.

(a) Started business by issuing 10,000 shares of common stock for $20,000.
(b) Purchased equipment for $5,400 cash.
(c) Provided services to customers for $7,800 cash.
(d) Paid employee salaries, $5,200.
(e) Provided services to customers for $2,500 on account.
(f) Paid $800 for current advertising in a local newspaper.
(g) Received utility bill of $1,300 for the current month to be paid next month.
(h) Received cash from a customer for $1,000 for a gift card for services to be provided in the future.
 

Answer rating: 100% (QA)

part 1 To determine when revenue is recognized using cash basis accounting and accrual basis accounting for each scenario we need to understand the key differences between the two methods Cash Basis A... View the full answer